California Democrats signal they want to reform Proposition 13

SACRAMENTO -- The third rail of California politics may not be as deadly as once thought.

Three and a half decades after the passage of Proposition 13 shook the political landscape in California and sparked a taxpayer revolt across America, voters appear to be warming up to the idea of reforming the initiative as long as protections for homeowners stay intact.

And the apparent sea change in public attitudes, combined with the two-thirds majorities Democrats now hold in both chambers of the Legislature, has emboldened some politicians to take aim at the iconic measure.

"It is time for a fix, because Proposition 13 is broken," said Assemblyman Tom Ammiano, D-San Francisco, who plans to introduce a bill next year aimed at forcing businesses to pay higher property taxes.

The landmark 1978 measure rolled back property taxes and capped yearly increases until a property is sold, but critics say one of its unintended consequences was shifting more of the Golden State's property tax burden from businesses to homeowners.

In addition to Ammiano's bill, two constitutional amendments heading to the Legislature would allow voters to approve local parcel taxes for schools and libraries on a 55 percent vote, rather than the 66.7 percent now required.

In a recent poll by the Public Policy Institute of California, 58 percent of registered voters said they favored a "split roll" property tax, in which commercial properties would be reassessed annually or semiannually according to their market value, while taxes on residential properties would continue to be capped at 2 percent annual increases. And since Democrats took full control of the Legislature in last month's election, some legislators have suggested that it's time for a so-called "split roll."

Proposition 13 has held a central place in California's political discourse since voters approved it with nearly 65 percent of the vote in June 1978. It's credited with fomenting the rise of the anti-government, anti-tax movement that swept Ronald Reagan into the White House.

"It really has symbolized an unwillingness to permit Sacramento to raise general taxes," said Max Neiman, a fellow at UC Berkeley's Institute for the Study of Government. "It's suggested a kind of decline from the time California was a leader in an array of public services."

But voters now seem to have a "nuanced understanding that we simply aren't going to cut our way out of the fiscal deficit, and some kind of tax increases will have to take place," Neiman said. He pointed to the passage of Gov. Jerry Brown's tax measure, Proposition 30, as evidence that voters believe more revenues are needed, especially if they come largely from the wealthy.

A ballot box battle over amending Proposition 13, however, won't happen before November 2014. And it may come even later since Brown probably isn't eager to share the ballot with an issue that could blow up in his face if, as is expected, he runs for re-election.

Still, two Democratic lawmakers, Sens. Lois Wolk, D-Davis, and Mark Leno, D-San Francisco, next year will try to lower the Proposition 13 threshold for parcel taxes -- a move that would need voter approval. Senate President Pro Tem Darrell Steinberg, D-Sacramento, called it a "sound idea" to give local governments the ability to "affect their own destiny," he said. "I think the public will get behind 55 percent."

The threshold for passing local school bonds is already 55 percent.

Steinberg, however, has balked at rushing through the constitutional amendments. And he said it's not yet time to take on an overhaul of Proposition 13 by creating a split-roll tax.

But Ammiano plans to introduce legislation early next year to close a loophole that allows corporations to sidestep reassessments on properties they purchase.

In one of many similar cases, the wine company E&J Gallo averted a higher reassessment 10 years ago after buying the prime 1,765-acre Louis M. Martini vineyards in Napa and Sonoma, when 12 Gallo family members bought individual shares -- none greater than 50 percent. The move costs Napa County as much as $700,000 a year in taxes.

"Why should these multibillion-dollar corporations get these breaks at the expense of regular folks?" Ammiano asked.

Ammiano said he hopes the Legislature will act on his bill before the end of spring. It would not require voter approval because it would only be a statutory change.

But it's expected to kick up a firestorm of opposition from businesses.

"You'll see them feeling like they're targeted. And when that happens, you'll see them stand up and fight," said Allan Zaremberg, president and CEO of the California Chamber of Commerce.

A key finding in the PPIC poll that should give Democrats pause is that 60 percent of voters still support Proposition 13, said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, a group founded by the measure's co-author.

"Proposition 13 is more popular today than when it passed," Vosburgh said. "We are definitely for enforcement when we know there are documented cases of efforts to get around legitimate change of ownership. But we don't see it as an overall problem. It's all about the state trying to get more money."

The turning point for reformers could come when homeowners begin to realize they're carrying most of the load for property taxes, proponents say. In 55 of 58 counties, residential homeowners are paying more property taxes than businesses, after businesses had taken up much of the burden before Proposition 13, according to a study compiled by Lenny Goldberg, president of the California Tax Reform Association.

Facts about Proposition 13

Approved in June 1978 with 64.8 percent of the vote.

What it did: Rolled back property values for tax purposes to 1975-76 levels and created a base tax rate of 1 percent, with annual tax increases limited to the inflation rate or 2 percent, whichever is lower. When a property is sold, it is reassessed based on the selling price.

Declared constitutional by the U.S. Supreme Court in 1992.

Other requirements: A two-thirds majority of the Legislature must approve all new taxes. A two-thirds vote is also required if local governments want to raise a tax for a specific purpose.

Past changes: Voters have approved four measures to amend Proposition 13, most strengthening it. In November 1978, Proposition 8 permitted a reassessment of property values in the wake of a disaster or a declining market; Proposition 60 in 1986 allowed homeowners 55 and older to transfer the assessed value of their present home to a replacement home; Proposition 39 in 2000 lowered the required supermajority necessary for voters to pass school bonds from two-thirds to 55 percent; and Proposition 218, in 1996, gave the people the right to vote on all local taxes and required taxpayer approval of assessments and property-related fees.